I'm guessing you're doing something liek this:
Bitmap bitmap = new Bitmap (filename of jpeg);
and then doing:
OnPaint (...)
{
Graphics g = ....;
g.DrawImage (bitmap, ...);
}
This will be resizing the huge JPEG image to the size shown on screen every time you draw it. I'm guessing your JPEG is about 2500x2000 pixels in size. When you load a JPEG into a Bitmap, the bitmap loading code uncompresses the data and stores it either as RGB data in a format that will be easy to render (i.e. in the same pixel format as the display) or as a thing known as a Device Independant Bitmap (aka DIBitmap). These bitmaps require more RAM to store than a compressed JPEG.
Your current implementation is already doing format conversion and resizing, but doing it in an innefficent way, i.e. resizing a huge image down to screen size every time it's rendered.
Ideally, you want to load the image and scale it down. .Net has a system to do this:
Bitmap bitmap = new Bitmap (filename of JPEG);
Bitmap thumbnail = bitmap.GetThumbnailImage (width, height, ....);
bitmap.Dispose (); // this releases all the unmanged resources and makes the bitmap unusable - you may have been missing this step
bitmap = null; // let the GC know the object is no longer needed
where width and height are the size of the required thumbnail. Now, this might produce images that don't look as good as you might want them to (but it will use any embedded thumbnail data if it's present so it'll be faster), in which case, do a bitmap->bitmap resize.
When you create the PDF file, you'll need to reload the JPEG data, but from a user's point of view, that's OK. I'm sure the user won't mind waiting a short while to export the data to a PDF so long as you have some feedback to let the user know it's being worked on. You can also do this in a background thread and let the user work on another collage.